Tanker companies have been pumping out impressive results in recent weeks but it is the owners of smaller ships that have led the field and will continue to do so in 2001, analysts said. They said the best of them so far has been Teekay, which with its fleet of 75 Aframaxes (70-80,000 tonners) reported a profit of $270 million for the year ended December 31, 2000, compared to a loss of $17.7 million in the preceding year. It also beat analysts' predictions.
"Teekay beat the street by a long way," said Nicolai Heidenreich of consultants Marine Money Capital Partners. "We look at Teekay as being relatively cheap at $41-42 per share."
Another big Aframax operator, Overseas Shipholding Group, last week reported $90.3 million profits for 2000, compared with $14.8 million in 1999. Both Teekay and OSG's results reflect an extremely strong Aframax market in 2000. Teekay is upbeat about 2001. "Aframax charter rates in the Arabian Gulf-East routes, where two thirds of Teekay's Aframax fleet is currently trading, continued to rise further into the first quarter of 2001," the company said.
Analysts said the sector would remain somewhat isolated from a slight downturn the tanker industry is facing in 2001. "Aframaxes will be the slightly better performer (in 2001)," said Jim Winchester, shipping analyst at investment bank Lazard Freres in New York. "When you start seeing OPEC cutting back production, it hits VLCCs first."
"The other thing that lends a defensive character to (Teekay's) Aframaxes is that they primarily trade in Asia," he said. "The Asian economy we feel will have a growth nature, and that will be helpful to Aframaxes."
Tanker analyst Pankaj Khanna at London shipbrokers
SSY said the main reason to expect strength in the market came from tight tanker supply. "Only nine Aframaxes will have been delivered into the crude trades by the end of 2001 while 68 will have reached 25 years age and will be prime candidates for scrapping," he said. "The fleet will contract, putting upward pressure on rates."
"It's generally agreed the impact of the phase-out will be more marked in the Atlantic than in the Pacific where Teekay's Aframaxes trade," Heidenreich said.
The strict phase-out of single-hulled tankers in the Atlantic is expected to reduce tanker supply, putting upward pressure on rates. Shipping sources said Teekay had already hired investment bank Goldman Sachs to explore potential for expansion, particularly in the Atlantic market. Brokers said on Thursday that Teekay was behind a bid for Oslo-listed Ugland Nordic tankers, which operates in the Atlantic.
Teekay declined to comment on this. "We're always looking for opportunities for growth, but not necessarily in the Atlantic," said a spokesman.
According to Winchester, the future prosperity of tanker companies hinges on discussions at IMO in April.
"The key issue this year for the long-term investor is whether the IMO phase-outs (of single-hulled tankers) are adopted as foreseen in October, or whether they'll be watered down," he said.
"If it goes through as originally drafted, we could see the upturn extended by 2-3 years," he said. - (Reuters)